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Aussie rally extends through Easter break

AUD - Australian Dollar

The Australian Dollar opens higher this morning having enjoyed strong gains through the Easter break. With most markets closed over the Good Friday and Easter Monday holiday’s our attentions turn to Thursday for the source of the AUD upturn. Improvement in risk demand through last week helped the AUD push through resistance barriers at 0.6230 while extensions in the Federal Reserves Monetary policy platform prompted a broader USD correction, promoting further AUD upside. The Fed issued another round of emergency monetary policy measures geared to prop up an economy plunging into a recession. The new program is designed to invest a further 2.3 trillion into small and mid-sized businesses, support local and state government stimulus measures and prop up sub-investment grade securities. While met with some criticism and suggestion the Fed was creating an environment primed for moral hazard more action is clearly needed as US jobless claims pushed through 16million and unemployment is tipped to reach 10% before the end of the month. The AUD pushed through 0.63 ad 0.6350 to touch highs at 0.6407 late on Monday before edging lower into this morning open. The AUD currently buy 0.6380 US cents.

While COVID 19 remains front and centre, attentions are beginning to shift toward the economic landscape. Despite enjoying strong gains since touching 17 year lows last month the AUD still remains vulnerable to broader swings in risk sentiment and the looming recession. The IMF is predicting the worst recession since the Great Depression with over half of its 189 member countries already seeking financial aid. Attentions now turn to Thursday’s employment print, the first real marker of economic performance and a guide to just how deep the recession will be. With conservative estimates suggesting unemployment will push through 7% by October a poor read could force investors to undo recent gains.

Watch resistance on moves approaching 0.6420/0.6450.

Key Movers

The US dollar struggled throughout the Easter break, having been forced lower in the wake of the Fed’s new emergency monetary policy measures. Record levels of monetary policy support have led to an increased supply of USD within global financial markets through the last 4 weeks, easing liquidity concerns and prompting a short-term USD sell off. While risks to the greenback remained skewed to the downside in the short term, the rally across key counterparts like the AUD and NZD may be running out of steam as attentions shift back toward traditional macroeconomic data sets. The uncertainty that surrounds the economic impact of coronavirus and the success of domestic exit strategies will likely prompt another run of heighten volatility in the months ahead as economies attempt to deal with extensions in social lockdown measures, low growth, muted inflation and widespread unemployment pressures.

Expected Ranges

AUD/USD: 0.6080 - 0.6450 ▲

AUD/EUR: 0.5630 - 0.5880 ▲

GBP/AUD: 1.9330 - 1.9780 ▼

AUD/NZD: 1.0380 - 1.0520 ▲

AUD/CAD: 0.8780 - 0.8930 ▲